Irvine, CA-based Sabra Health Care REIT is focusing on diversifying its portfolio this year, including reducing its skilled nursing facility exposure, CEO, President and Chair Rick Matros said on Thursday’s earnings call.
The real estate investment trust expects that its SNF exposure will be “at or near all-time lows” by the end of the year, he said, later noting that the low point for SNF exposure at the REIT was 57%, right before Sabra’s merger with Capital Care Properties.
The concentration of SNFs in the portfolio will decrease because the REIT is selling more SNFs than anticipated due to the strength of the private market and is making acquisitions in senior housing and behavioral health, not skilled nursing, Matros said. Sabra, he added, had SNF sales valued at $100 million last year and expects to do “quite a bit more” this year.
One of the reasons for the diversification, Matros said, is that Sabra “trades better” when it is viewed as a diversified REIT. But that doesn’t mean Sabra is getting out of the SNF business.
In the five years leading up to the pandemic, Matros said, approximately 300 SNFs closed, and another 300 have closed within the past 26 months. Fewer facilities, combined with the growing size of the older adult population and facility renovations that will take beds out of service, will mean that occupancy will be propelled to pre-pandemic levels over the next several years, he said.
Mizuho Americas research analysts told the McKnight’s Business Daily: “The company anticipates reducing its skilled nursing exposure even further as it does targeted acquisitions while also recycling assets. With no additional tenant challenges, a well-covered dividend, and the recent underperformance, investors are likely to view results positively.”
After initial headwinds related to the omicron variant of COVID-19, Sabra’s seven largest skilled nursing tenants (representing approximately 40% of annualized cash net operating income) saw a sizable sequential increase in occupancy during the first quarter, the REIT said in a press release issued in conjunction with earnings call.
Overall, Sabra has collected 99.5% of its forecasted rents from the beginning of the COVID-19 pandemic through April 2022, including 100% of Avamere’s rent under its previous and amended leases.
See more coverage of the earnings call in McKnight’s Senior Living and McKnight’s Long-Term Care News.
